Mutual Exchange is the Center’s goal in two senses — we favor a society rooted in peaceful, voluntary cooperation, and we seek to foster understanding through ongoing dialogue.

Mutual Exchange will provide opportunities for conversation about issues that matter to the Center’s various publics. A lead essay, deliberately provocative, will be followed by responses from inside and outside of C4SS. Contributions and comments from readers are enthusiastically encouraged.

The following Mutual Exchange began as a Molinari Society Symposium on Spontaneous Order scheduled for the December 2010 meeting of the Eastern Division of the American Philosophical Association in Boston; when that was snowed out, the venue was shifted, by the kind invitation of the Ludwig von Mises Institute, to the March 2011 Austrian Scholars Conference in Auburn, Alabama.

* * *

I’m grateful to Nina, Reshef, and David for their thoughtful comments on my paper. My responses follow.

Most of Nina’s questions are for Charles; but she does ask why, in my survey of spontaneous-order mechanisms that explain the dominance of corporatism, I make no appeal to “mechanisms expressing sociability, or the desire to fit in with the group”; she speculates that it might be because this is “not a mechanism associated with spontaneous order.” Actually I do think this mechanism is an instance of spontaneous order (in all three of Charles’ senses); the reason I didn’t mention it is that it doesn’t explain the specific appeal of corporatism in particular. The desire to fit in with one’s peers acts as a conservative force tending to maintain any social system in place, whether corporatist or anti-corporatist.

Admittedly, though, a combination of establishment propaganda and the normalising practices of government schools and corporate workplaces tends to strengthen this tendency by inculcating and reinforcing conformist values.

Reshef’s comments puzzle me. He suggests that Charles and I are “downplaying the depth of the problems” of communicating our ideas to those who share the dominant vision. We “seem to think that we can just give the invisible hand description of the emergence of some social order, and that that would instantly make sense” to those we are trying to convince; but there is “reason to be more pessimistic,” Reshef insists, because people do not all “have to see the same thing, the same pattern.”

It’s odd to see a point I thought I had made at some length being offered as something I’d failed to pay any attention to. What was all my discussion about Kuhnian paradigms, and black spades with red borders, and Galilean versus Aristotelean perception of pendulums, if not a recognition and extended discussion of the very issue that Reshef raises here? And what is Charles’ discussion of myrmidons, or his appeal to the example of Wikipedia, or his analogy between the role of police-blotter rapists in Brownmiller’s theory and lawyers in Hayek’s theory, if not an effort to “tempt people, somehow, to see things in a certain light, and identify certain patterns”?

Reshef goes on to suggest that if “some dispersed, polycentric, acts are acts of wrongful violence,” then “the anarchist seems to have no reason to reject the state,” since “the mere rejection of an archē, a sovereign, does not guarantee a good social order.” But the anarchist claim is that being a state is sufficient for being a system of wrongful violence, not that it is necessary. One might as well argue that if there are diseases other than leprosy, then there is no reason to oppose leprosy, since being free of leprosy does not guarantee that one is healthy overall.

Reshef further suggests that if “state power itself depends on spontaneous order mechanisms,” then “the anarchist seems to have no reason to be an adherent of spontaneous order, for it may lead to the creation of a state.” If Reshef means that the mere fact that something is a spontaneous-order mechanism is by itself no reason for the anarchist automatically to favour it, then of course I agree – but again I am puzzled as to why Reshef thinks this is a problem for, rather than an essential part of, what I was saying. A bit of light is shed by Reshef’s remark that “Johnson and Long do not make their claims in order to question spontaneous social order, but to support it.” But the whole point of both my and Charles’ papers was that some spontaneous orders are good and some are bad, not to take a stand “for” or “against” spontaneous order considered as a homogeneous glop.

Reshef asks what makes anarchy desirable, if merely being a spontaneous order is not enough to make it so. Or in other words: “What exactly makes the state a bad social order?” A full answer to that question goes beyond the scope of this discussion, but essentially a forced monopoly is a) bad in itself because it claims rights for some people that it denies to others, and b) bad in its consequences because, as a monopoly, it is subject to incentival and informational perversities that have disastrous effects on the lives of the people it purports to govern. (I say a bit more here.)

Reshef also asks what is “the point of advocating the use of spontaneous means, if these are the only kind of means in existence.” But neither Charles nor I ever suggested that all and/or only spontaneous means (in all three senses?) should be used, nor can I see that anything we said supports the claim that all means are spontaneous. Reshef describes me as holding that “the means of the state are also in the last account spontaneous.” If that means that the state’s use of non-spontaneous means depends on spontaneous means, then yes; but if that means that the state uses only spontaneous means, then no. Compare the claim that I can’t use matches to make a campfire unless oxygen is present; this doesn’t imply that in making the fire I use only oxygen and not matches as well.

Reshef challenges my attribution to Wittgenstein of the claim that “when otherwise sensible people say crazy, obviously false things – such as that only part of me exists at this instant, or that we can’t directly perceive tables and chairs – it’s because they are in the grip of a picture.” Instead Wittgenstein suggests that we lack enough common ground with such a person to communicate with her.

In response, I wish to distinguish what Wittgenstein says about people who are living a different form of life – like the wood-sellers in his Foundations of Mathematics, who sound like deviant speakers of our own language but in fact are perfectly competent speakers of a different language – and those, like the philosophers that Wittgenstein criticises at PI 116, who have fallen for “bewitchments of language” and are failing to make sense in any language.

As for the suggestion that Wittgenstein sees nothing “bad about being in the grip of a picture,” I would point to PI 115 (and its context, especially the aforementioned PI 116).

Reshef also takes me to attribute to Wittgenstein (and, I guess, to endorse in propria voce) the claim that “A rule has any obligatory force, just if people normally obey it.” But I’m not sure why he thinks this.

The passage of mine that he quotes in support of his interpretation – namely that “A constitution is not some impersonal, miraculously self-enforcing robot. It’s an ongoing pattern of behavior, and it persists only so long as human agents continue to conform to that pattern in their action” – was about constitutions (in the institutional sense), not rules, and was about their existence, not their obligatory force.

David worries that on my view, “under the state system, prices are no longer established through market competition”; instead, “powerful corporations control monopolistic or oligopolistic markets,” in which wages “depend, to a large extent, on bargaining power,” insmuch as “workers’ marginal productivity leaves open vast zones of indeterminacy.”

Against this, David appeals to the following Austrian theses:

a) “The fact that a business has gotten to its position through government aid does not by itself change the way it sets prices.”

b) “Neither is it the case that large firms operate by setting monopolistic or oligopolistic prices rather than competitive ones.”

c) “[Z]ones of indeterminacy are mythical.”

With regard to (a), I’m less concerned with how the firm got to its position than with how it is ongoingly maintained there. Likewise with regard to (b), what makes firms oligopolistic is not their size, nor their mere fewness, but insulation from competition through barriers to entry. Moreover, since we (David and I) are Austrians, not neoclassicals, we must bear in mind the existence both of nonmonetary incentives and of factors impeding equilibration.

Consider the following example. In the 1940s, my grandmother moved to Florida and outraged the other white housewives in the neighbourhood by paying her black servants higher wages than was customary in the area. The neighbours’ complaints were twofold: by paying higher wages, my grandmother was both “stealing away” the best servants, and encouraging higher aspirations among the black servants generally. (Now my grandmother’s primary motive, as I understand it, was not humanitarian, exactly – and certainly not antiracist; but neither was it the prudential one of attracting the best help. Rather, it was something more like a feeling that it was tacky to pay wages as low as her neighbours were paying. She’s not the hero of this story; she regarded blacks, and servants generally, as her social inferiors. But she regarded people who, by her lights, underpaid and exploited their servants as her social inferiors also.)

In effect, the white housewives had been functioning as an informal cartel – a cartel that had long been fairly stable, since for most of its members the fear of social sanctions from their peers outweighed the temptation of hiring the best workers. Hence the cartel was broken (to the extent that it was) not from within but from without, since my grandmother did not intend to live in Florida permanently, and her own mores, derived from her own peer group, mattered more to her than the mores of temporary neighbours that she looked down on in any case.

If the white Florida housewives had been homo œconomicus profit-maximisers, then their desire to hire the best servants would have led them to bid up wages; but their desire to hold blacks down, and/or their fear of social pressure from others who sought to hold blacks down, outweighed their desire to compete for the best servants. (Note that a commitment not to compete along the wages dimension is consistent with competing along other dimensions; and likewise, competing on wages within a certain range is consistent with the range’s contours themselves being set by non-competitive considerations. So the line between competition and oligopsony is fuzzy, not sharp.) But such internal pressure is less able to fend off external competitors with a different set of social ties.

The moral is that, as I’ve argued elsewhere, cartels are often easier to break from without than from within:

[P]ressure within a selectively cooperative venture … may be strong enough to discourage defections. … The pull of the bottom line can be quite limited in the face of social ostracism by one’s peers. … But that is precisely why I stress the importance of free competition. … The easier it is for a new venture to start up, the easier it is for harmful cooperative ventures to be undermined from without.

Turning to the case of corporatism: it’s likewise easier for a cartel of employers to maintain itself if their numbers are kept artificially low and it is rendered artificially difficult for new firms to arise to compete with them. (Though I speak of a cartel, there needn’t be conscious collusion among employers to keep wages down; a common set of cultural assumptions and expectations will do the trick.)

As for (c), I think there are likewise good Austrian reasons for believing that in a corporatist economy – one that encourages companies to grow in size and complexity beyond the point of efficiency, by socialising the costs of doing so while privatising the benefits – such zones of indeterminacy will be substantial. As I’ve argued elsewhere:

There is certainly a tendency for workers to be paid in accordance with their marginal revenue product, but the tendency doesn’t realise itself instantaneously or without facing countervailing tendencies, and so does not license the inference that workers’ wages are likely to approximate the value of their marginal revenue product – just as the existence of equilibrating tendencies doesn’t mean the economy is going to be at or near equilibrium. …

First of all, in the real world most employers do not know with any great precision their workers’ marginal revenue product. Firms are, after all, islands of central planning – on a small enough scale that the gains from central coordination generally outweigh the losses, but still they are epistemically hampered by the absence of internal markets. This would be true to some extent even in a genuinely freed market, and is still more true in a hampered market where government privileges encourage greater firm size and centralisation.

A firm confronts the test of profitability as a unit, not employee by employee, and so there is a fair bit of guesswork involved in paying workers according to their profitability. … [A]n entrepreneur doesn’t have to solve those problems perfectly in order to prosper – as anyone who has spent any time in the frequently insane, Dilbert-like world of actual industry can testify. … A firm that doesn’t pay adequate attention to profitability is doomed to failure, certainly; but precisely because we’re not living in the world of Platonic competition, firms can survive and prosper without being profit-maximisers. They just have to be less irrational than their competitors. Indeed, it’s one of the glories of the market that it can produce such marvelous results from such crooked timber.

Moreover, a preference for underpaying workers may be a “consumption good for managers” (as it arguably was for my grandmother’s neighbours) that “can be treated as part of the manager’s salary-and-benefits package,” just as “some managers order fancy wood paneling for their offices.”

I would also add – going back to my earlier reference to the “common set of cultural assumptions and expectations” that can maintain cartels even in the absence of conscious collusion – that if (as is only natural) employers tend to have an overstated view of the contribution that managers make to a firm’s profitability, and an understated view of the contributions of rank-and-file employees, the calculational chaos inherent in privileged firms’ tendency to grow in size and complexity beyond the point of profitability means that it will be much harder for this error to be corrected by price signals than it would be in a freed market.

Rothbard himself says that “[t]he greater the number and variety of goods available … the more negligible will zones of indeterminacy become.” In other words, zones of indeterminacy decrease as competition increases. Surely the corollary is that zones of indeterminacy increase as competition is artificially constrained. To quote Rothbard again: “All forms of government regulation of business, in fact, penalize efficient competitors and grant monopolistic privileges to the inefficient.”

Against my claim that the corporatist labour market is largely oligopsonistic, David cites Mises’ claim that there is “no such thing as a mixed economy, a system that would stand midway between capitalism and socialism” (by which he means “midway between free markets and state-socialism”). But in saying this Mises does not deny that a third system is possible. How could he, when we are so clearly living in a system that is neither pure state-socialism not a pure free market? On the contrary, in the very same paragraph Mises goes on to call interventionism (of which corporatism is the preeminent form) a “third pattern which has its own particular features and must be judged according to its own merits”; in this passage, he simply denies that this third pattern is a blend of the other two, insisting that it is “something entirely different from each of them.” Elsewhere he of course denies that interventionism is “feasible as a permanent form of economic organization.” But that’s not the same thing as saying it doesn’t exist – for si monumentum requiris circumspice.

Having read Roderick’s comments on my comments on his paper, I think Roderick gave me too much credit—credit that I understand something which I don’t. I somewhat feel now as if I’m now buried in details of wording and argument, and cannot anymore see the problem I raised. I have a naïve worry–very naïve–about the intelligibility of the anarchist position. That is, I am genuinely in the dark about what the anarchist wants. I’m genuinely in the dark about what the anarchist would consider a good, desirable, social order. But Instead of arguing point by point, and getting further lost in the details, let me try to weave some of the details back into a line of argument, and try again to give expression to my failure to understand—because this is what I was trying to express: not criticism, for I don’t take myself to understand what anarchism is about in the first place. I don’t yet see a position to criticize. I don’t see the gestalt. It is MY failure, not Roderick’s.

Now, Roderick may again be puzzled by what I say now, because he did say something about what the anarchist wants: a social order that is not characterized as forced monopoly. But for some reason this is not enough for me. My problem, I think, is that I don’t see how that gives me a criterion that could help me identify a social order as forced monopoly. That is, the concept’s usefulness as a term of criticism is unclear to me. (I’m not saying there isn’t a criterion; just that I don’t see it.) Roderick might again be surprised that I cannot see such a criterion, but I think he has the resources to understand my blindness: Given his insistence that he is aware of the fact that the very same thing may legitimately look completely different to two people, shouldn’t this also apply to social order? Shouldn’t Roderick also allow that what legitimately looks like, and is, forced monopoly to one, may legitimately not look like, and be, that to another?

The problem is acute when it comes to social orders, for when it comes to social order it is not an abstract problem anymore (as it might be with scientific theories, and duck-rabbits), but a very real one: Some people feel that their government represents them and is not at all forced upon them, and some feel the opposite about the very same government. And it may not be possible to trace this difference to some fact about those people (age, education, social status, and so on.) This is very common, and it seems to me that it is an instance of something larger: it doesn’t just happen with governments, it happens with piano lessons as well, and many other things. If a parent sends two siblings to piano lessons, the very same treatment by the parent can be felt by one sibling as oppressive, and by the other as not oppressive. And both may be reasonable, and both may have a legitimate claim.

Going back to the state, Roderick seems to be just taking it for granted that the state is forced monopoly. And it is this bit in what Roderick is saying that makes me worried about how seriously he takes his own discussion about Kuhnian paradigms, and black spades with red borders, and Galilean versus Aristotelean perception of pendulums. For just as in the piano lesson case, I don’t see why it should be impossible for the very same social reality to legitimately and reasonably strike someone as oppressive, and another as not oppressive. I am probably failing again to see how these two parts of Roderick’s argument are supposed to bear on each other. And if the idea is to keep them separate, then I don’t see why they should be so kept.

Partly, I think, my worries here are nurtured by the fact that Roderick is not merely attempting to criticize a particular social reality, but a general form of social order: the state. It is not just the current political situation he dislikes, but something much more abstract and multiform. For the state is really a family of forms of social orders, not a single form. I am only interested in Roderick’s criticism insofar as it pertains to this abstract form of social orders–the state. It is possible that this notion is so multiform and unspecific that it has become too vague for me to see what Roderick is attacking. It is, that is, unclear to me how to use the criteria Roderick mentions to judge that some form of social order should NOT be called “a state.” And it is unclear to me how Roderick could block the claim that what one person legitimately calls a state is legitimately not a state for another. And once again, the problem is a real one, for there could be legitimate differences between what people consider actions of the state, and about whether or not they at the same time consider those actions to also be theirs.

It sometimes seem to me that the anarchist wants a social order that could not possibly be seen as oppressive, or as forced monopoly. I may be wrong about this. I anyway can sympathize with that. It is a lovely dream. But it seems to me that it is only that –a dream, a fantasy. EVERY social order can be perceived, and be, oppressive, just as any action and intention and text can be legitimately interpreted in different ways.

Now, once we acept that, a possible reaction would be to rebel against the very idea of social order. And perhaps this explains the sort of bad name that anarchists have: for to reject the very idea of social order seems to come awfully close to rejecting part of our humanity as social creatures (unlike spiders, for instance). But I take it–and perhaps I misunderstand here too–that this is not where Roderick wants to go. And so I’m left with a question: where DOES he want to go?

"[It's] unclear to me how to use the criteria Roderick mentions to judge that some form of social order should NOT be called “a state."

I don't think that Roderick would deny that these blurry lines can exist; he could probably rattle off a dozen such examples. But in most cases of agricultural or industrial societies, by any standard definition of "state", this problem simply doesn't arise.

Indeed, many of our concepts are not defined so as to exclude every possible misunderstanding. But if a concept is a viable one, then it must at least allow for some agreements in judgments. What is unclear to me is whether the anarchist has a concept of "state" that allows for minimal agreements in judgment.

The problem (if there is indeed one) is an important one for the anarchist (Roderick, or not) b/c the state is exactly what the anarchist is aiming his criticism against. If you don't have a clear target, then your criticism is in trouble, b/c it is not clear what your criticism is ABOUT (if anything).

If the anarchist (Roderick) does not want to target social order in all its forms (if anarchy is a form of social order) then the anarchist must have some usable criterion to distinguish the kinds of social order they dislike from the one they like.

Since so many forms of social order get to be named "state" these days, and since the anarchist is launching a blanket criticism on ALL things statist, rather than only against unjust statist regimes–since, that is, anarchism is meant to be a radical form of criticism–then the anarchist's criticism threatens to be empty.

It is possible that those who call themselves "anarchists" simply want that more people be in positions of authority: that the responsibility for governing be divided b/w more people, many people. But this could very well be a statist form of social order, and it would be misleading to call those who endorse it "anarchists." It would be strange to me to suggest that such a regime should not be called "state," for such social order would not get rid of the governing, the regulating.

In general, a social order is something regulated–in one way or another, by many or by few. Our togetherness as a community is not something we have no control over. It is something we are responsible for. Hence, we need to regulate, to mange, to govern. It seems to me that this is part of the very concept of social order. There is no such thing as a social order without governing, as there is no such thing as a circle without diameter.

The anarchist sentiment is to dislike regulations. But this throws the baby out with the bathwater. This is why it always feels to me as if although the anarchist's heart is in the right place, her mind is dreaming.

You should definitely check out Roderick's wonderful series on Libertarian Ethics available from the Mises Institute. Especially the talk entitled "An Anarchist Legal Order". The most succinct, although possibly dated at this point, overview of his position on your comments, I think.

People tend to get very turned around in their heads because of the common conflation between a legal order and a state. A legal order is really the description of the legislative, judicial and executive functions of a society, in whatever scheme it happens to come in. The state is a forced, territorial monopoly of those functions. Anarchist simply point out that a forced monopoly, to quote Roderick, "is a) bad in itself because it claims rights for some people that it denies to others, and b) bad in its consequences because, as a monopoly, it is subject to incentival and informational perversities that have disastrous effects on the lives of the people it purports to govern."

You seem to be getting caught up on what kind of social orders the anarchist desires. That question is mildly ambiguous as it might mean:
a) What will be the common social pattern of interaction between people in an anarchic society?
b) What is the desired social pattern by anarchists like Long and myself?
c) How will the legal system function?

Here are my thoughts on these questions:

a) That will depend largely on the customs and culture of the people involved. We can look at historic examples of anarchic or near-anarchic societies and take some educated guesses, but it's one of the insights of Austrian economics that we can't know what the voluntary actions of large groups of people will be. However, given certain incentives that would be the case in a free market society, we postulate that the legal order will scale itself back to creating a peaceful and just legal order. See examples of functional near-anarchist legal orders of the past such as Iceland, early Anglo-Saxon England, etc.
b) This is the question that I think is closest to the question you intended to ask. We (anarchists) tend to appeal to economic and social incentives to explain why people tend to act the way they do. We point out that the statist system of forced monopoly provides the worst possible set of incentives for effectively administering the legal (legislative, judicial and executive) order. We would further like to influence society to peacefully and voluntarily adopt customs and practices that are virtuous and fall along our lines of moral and ethical beliefs. We strive to influence the culture of society in a way that encourages voluntary, peaceful coexistence among the members of society.
c) Again, we have a knowledge problem with knowing the future, but I would refer you to a very good book, The Enterprise of Law, for some compelling arguments for and historical references to voluntary law. See also Roderick's papers on the Icelandic Commonwealth.

Another seeming misunderstanding is evident here: "[S]ince the anarchist is launching a blanket criticism on ALL things statist, rather than only against unjust statist regimes[…]" I think this demonstrates the disconnect quite well. Unjust statism is redundant. We contend two premises that make it so. a) A forced monopoly is unjust (see Roderick's comments) and b) the state is a forced monopoly. So why we oppose all statism makes sense if you think of us as opposing injustice in general, and the state in this token case.

Perhaps the "anarchist sentiment" is to "dislike regulations", but that is not the theoretical stance of anarchism in general. This is another common sticking point for understanding anarchism. The confusion is that somehow since we oppose top-down, forced regulation, we support no regulation at all. We simply point out that the people involved in society have a MUCH better incentive to regulate fairly and efficiently, and for that matter, have a better track record of regulation (see the Lex mercatoria) than any state.

I disagree with the statement that "EVERY social order can be perceived, and be, oppressive". The Kuhnian paradigms that mention are the very cases of misperception that Roderick is trying to point out. He is claiming that there is an underlying reality, and that people are not perceiving it due in part to their learned categories. Your claim of legitimate perception amount to the claim that someone who is claiming a red spade is a spade with a red border is just as correct as those who perceive that it is an anomaly. Maybe they both have legitimate reasons to explain why they perceive the card in that way, but one is correct about the reality, and one is not.

The claim that one person can legitimately call something a state and another not a state is incoherent. It disregards the semantic meaing of the word state. A state, again, is a forced, territorial monopoly on the administration of a legal order. So any particular social order either is, or is not a state, regardless of the perception of people. If you are instead saying that some people prefer to be a part of a state system, while others do not, than we agree. However, if someone claims a token system is a state, he is either correct or incorrect, objectively. Your example of the piano lesson makes this point, really. For one child, being sent to piano lessons is against their will, so they do not like it and perceive it as oppression. For the other, they are being sent willingly to their piano lesson, so the force behind the sending is invisible. However, it is not the case that the reality of whether or not they must go, willingly or not, is any different for the two children. I believe that is what Roderick is pointing out in his paper.
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